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Exam 12: S Corporations

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Question 41

True/False

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Compensation for services rendered to an S corporation is subject to FICA taxes.

A) True
B) False

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Question 42

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Distributions of appreciated property by an S corporation are not taxable to the entity.

A) True
B) False

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Question 43

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Which item does not appear on Schedule K of Form 1120S?

It is not beneficial for an S corporation to issue § 1244 stock.

You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis. $\begin{array} { l r } \text { Owner's beginning stock basis } & \$ 36,800 \\\text { Increase in AAA } & 32,000 \\\text { Increase in } O A A & 6,300 \\\text { Payroll tax penalty } & 2,140 \\\text { Tax-exempt interest income } & 4,800 \\\text { Insurance premiums paid (nondeductible) } & 2,700 \\\text { Owner's purchases of additional stock } & 22,000\end{array}$ ?

In the case of a complete termination of an S corporation interest, a ____________________ tax year may occur.

Where the S corporation rules are silent, C corporation provisions apply.

Any losses that are suspended under the at-risk rules are carried forward and are available during an S corporation's post-termination period.

Tax-exempt income is listed on Schedule ____________________and ​ of Form 1120S.

Kinney, Inc., an electing S corporation, holds $5,000 of AEP and $9,000 in AAA at the beginning of the calendar tax year. Kinney has two shareholders, Eric and Maria, each of whom owns 500 shares of Kinney's stock. Kinney's taxable income is $6,000 for the year. Kinney distributes $6,000 to each shareholder on February 1, and it distributes another $3,000 to each shareholder on September 1. How is Erin taxed on the distribution?

An S corporation that has total assets of at least $50 million on Schedule L at the end of the tax year must file a Schedule M-3.

Since loss property receives a ____________________ in basis without any loss recognition, S corporation distributions of loss property should be ____________________.

The passive investment income of an S corporation includes net capital gains from the sale of stocks and securities.

A newly formed S corporation does not receive any tax benefit from an NOL incurred in its first tax year.

An S election made before becoming a corporation is valid only beginning with the first 12-month tax year.

The Section 179 expense deduction is a Schedule K item on the Form 1120S.

Shareholders owning a(n) ____________________ of shares (voting and nonvoting) may ____________________ revoke an election.

Which item is not included in an S corporation's nonseparately computed income?

NOL carryovers from C years can be used in an S corporation year against ordinary income.

For a new corporation, a premature S election may not be effective.